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The five dumbest things on Wall Street this week
By Colin Barr 5/20/2006
"TheStreet.com" examines the dumb things on Wall Street and in corporate America. Using its 100-point-scale Dumb-o-Meter, "TheStreet.com" scores corporate foibles.
1. Freedom rings
Verizon (VZ, news, msgs) and rivals AT&T (T, news, msgs) and BellSouth (BLS, news, msgs) have been getting belted around by reports that the three big phone companies have allowed the National Security Agency to secretly collect Americans' calling records.
"Based on our review to date, we have confirmed no such contract exists and we have not provided bulk customer calling records to the NSA," BellSouth said.
"If and when AT&T is asked by government agencies for help, we do so strictly within the law and under the most stringent conditions," AT&T told The Wall Street Journal.
But the strongest comments came from Verizon.
"Verizon does not, and will not, provide any government agency unfettered access to our customer records or provide information to the government under circumstances that would allow a fishing expedition," the company said last Friday.
On Tuesday it felt the need to defend itself again, as well as remind us that it isn't just a telecommunications giant.
"Verizon always stands ready ... to help protect the country from terrorist attack," Verizon thunders in a second press release on the subject. "We owe this duty to our fellow citizens."
Right on. As Rudy Giuliani famously said on the morning of Sept. 11, "I'm sure glad Verizon is my phone company."
Dumb-o-Meter score: 93. OK, maybe it was President Bush he was glad about, but we still feel safer now.
For more on Verizons dumbness, click here
2. Dropouts
Bausch & Lomb (BOL, news, msgs) finally blinked on ReNu with MoistureLoc, recalling the contact lens cleanser worldwide after a long series of setbacks.
Last month, Bausch pulled U.S. MoistureLoc shipments as regulators probed its link to a potentially blinding fungal infection called Fusarium keratitis. Bausch had earlier pulled shipments in Asia. Yet the company maintained that there was no evidence that MoistureLoc contributed to the infections.
But now, in light of additional infection reports and further testing, Bausch has seen the light. The company "has proposed that unique characteristics of the formulation of the ReNu with MoistureLoc product in certain unusual circumstances can increase the risk of Fusarium infection," the Food and Drug Association said this week.
Bausch put the recall in slightly different terms. "Bausch & Lomb's top priority is the safety of our customers, and we want them to have complete confidence in our products," CEO Ronald Zarrella said Monday.
Dumb-o-Meter score: 88. Complete confidence doesn't seem to be in the cards right now.
For more on Bausch & Lombs dumbness, click here.
3. Hangover
Tenet (THC, news, msgs) agreed to pay $21 million to settle federal kickback charges at its Alvarado Hospital Medical Center. Tenet also agreed to divest itself of Alvarado after it spent three years defending the San Diego hospital in court.
The feds accused Alvarado of improperly lining doctors' pockets in a bid to boost admissions. Tenet has long denied the allegations, claiming that doctor-relocation payments are commonplace. But the company -- which has been eager to put the Alvarado case to rest so it can pursue a global settlement of other federal inquiries -- backed down after the feds threatened the hospital's federal insurance standing.
So Tenet ended up paying the big fine and signing off on an "explanatory statement," conceding that "certain host physicians had obtained excessive payments" and that the Alvarado case has been a sobering event for Tenet."
Dumb-o-Meter score: 85. No word on which of the 12 steps Tenet has embraced.
For more on Tenets dumbness, click here.
4. Chip challenge
Camarillo, Calif., semiconductor company Vitesse (VTSS, news, msgs) fired its CEO and two other execs Wednesday as a stock-option scandal threatens to turn into a full-fledged accounting nightmare.
Vitesse said CEO Louis Tomasetta, CFO Yatin Mody and Executive VP Eugene Hovanec were terminated, as an internal probe of possible option backdating expanded to cover revenue recognition issues and quarter-end cash reporting. Shares fell 26% in a day and have lost half their value in the past two months. Vitesse also got a default notice from its lender, Silicon Valley Bank.
Sounds bad, but luckily the flacks know just what to say. This kind of situation is, in their lingo, just a challenge.
"This has been a very challenging time for the company," Chairman John Lewis explains in a press release. "The new management team has done an excellent job in a very short period of time to address the pending challenges to Vitesse."
"In spite of the recent challenges we face with respect to our financial reporting and other issues," adds new CEO Chris Gardner, "Vitesse remains focused on executing our strategic business plan to capitalize on the investments we've made."
Dumb-o-Meter score: 80. The real challenge is figuring out what else Vitesse might focus on.
For more on Vitesses dumbness, click here.
5. Outcome statement
General Motors (GM, news, msgs) set plans Wednesday to restructure its finance ranks.
Controller Paul Schmidt will retire later this year, and chief accounting officer Peter Bible will resign June 1 to pursue other career options. GM, which plans to combine the positions of controller and chief accounting officer, began a search for external candidates.
GM also hired turnaround firm AlixPartners to tighten its controls and generally shape up its bookkeeping.
"One of our key objectives in finance is to minimize risk," said finance chief Fritz Henderson. "To that end, we are moving quickly to make sure that we have a robust level of internal controls and systems in place -- and AlixPartners has tremendous expertise to support this initiative."
GM and Alix seem like a good fit. GM has been hit over the past year by a series of accounting missteps, including revisions to its quarterly results and a restatement dating back several years. And AlixPartners' slogan, as noted on its Web site, is "change the outcome."
Dumb-o-Meter score: 75. Unfortunately, weighed down by flagging sales and hefty overhead, GM has a much taller task: It needs to change the income.
For more on GMs dumbness, click here.
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